Alcoa (NYSE:AA) announced a net income of US $232 million in the third quarter of 2025 — more than double the US $90 million it earned in the same quarter the previous year. Here’s an overview of why the stock has surged approximately 40% over the last six months, the factors driving this change, and points to monitor going forward.
However, if you are looking for a less volatile upside than owning a single stock, consider the High Quality Portfolio. It has significantly outperformed its benchmark—a combination including the S&P 500, Russell 2000, and S&P MidCap indexes—and has delivered returns surpassing 105% since its inception. Additionally, see – Opendoor Stock – The Comeback Story.
Factors Driving the Increase
- Commodity performance and supply/demand factors. Aluminum prices have recently risen to around US$2,892 per tonne, indicating growing demand alongside limited supply. With Alcoa owning resources in bauxite, alumina, and primary aluminum, the firm benefits from rising prices. Furthermore, a broader analysis points to a potential 40% increase in aluminum demand by 2030, providing additional support.
- Enhanced profitability and adjusted portfolio actions. In Q3 2025, Alcoa’s revenue rose to US $2.995 billion compared to US $2.904 billion a year prior. Net income increased to US $232 million. This increase is partly due to a beneficial investment-divestment: the sale of its joint venture with “Ma’aden” in Saudi Arabia and the mark-to-market gain on its investment helped to boost financial results.
- Intensive focus on operational efficiency and cost management. Alcoa has lowered its capital expenditure forecast for 2025 to US $625 million and has restructured parts of its portfolio. The company also indicated potential benefits in its alumina segment from reduced maintenance at elevated production levels.
- Strategic investments for future growth & structural developments. Alcoa is engaging in the transition towards “critical minerals” and sustainable aluminum production. For instance, its prospective gallium-production facility in Western Australia (which has the capacity to supply up to 10% of the global gallium market) is garnering support.
These strategic initiatives are offering the market a forward-looking growth narrative beyond standard aluminum.
What’s Next — Key Factors & Risks
- Shipment growth & cost trends: While prices remain favorable, Alcoa’s anticipated aluminum production for the full year is projected to stay between 2.3-2.5 million metric tons, with alumina expected in the 9.5-9.7 million metric ton range. Achieving these volumes, along with cost management (tariffs, energy, currency), will be crucial.
- Tariff, energy, and input-cost pressures: Alcoa noted an approximately US $90 million adverse impact due to U.S. tariffs on Canadian imports within its Aluminum segment. Risks also exist regarding energy costs (given that smelting is energy-intensive) and fluctuations in alumina prices.
- Commodity cyclicality and financial discipline: The aluminum industry is notoriously cyclical. Even with the current high prices, any downturn in global demand (for example, from construction or automotive sectors) or oversupply could swiftly compress margins.
- Valuation and expectation management: With many positive expectations already factored into the price — a mix of growth initiatives, margin expansion, and future volume increases — there’s limited margin for error. Should Alcoa face execution challenges, the stock could experience a sharp decline.
- Strategic growth drivers: Initiatives such as green-smelting partnerships, the critical-minerals (gallium) asset in Australia, and enhanced smelter/refinery compositions could unlock additional growth — provided they meet throughput, cost, and timeline objectives.
Alcoa’s rise (40% over six months) is supported in part by a combination of stronger aluminum prices, a streamlined cost structure, and a strategic shift towards energy-efficient and critical-minerals sectors. However, this stock is not without risks — it depends on commodity trends, effective execution, and favorable macro conditions. If Alcoa can achieve volume growth while managing tariffs, energy, and alumina costs, further gains may be possible; but any downturn in the cycle or cost surprises could quickly reverse the progress. We assess Alcoa’s value at $40, which is currently aligned with the market price.
Now, we implement a risk assessment framework while developing the Trefis High Quality (HQ) Portfolio, which, comprising 30 stocks, has a proven history of excelling relative to the S&P 500 over the past four years. Why is this so? As a collective, HQ Portfolio stocks have yielded superior returns with lower risk than the benchmark index; there’s less volatility, as demonstrated in HQ Portfolio performance metrics.